Car-leasing has been lauded as a more attractive alternative to buying,
offering in the process the flexibility to drive a new car for less. The
reality, however, is that leasing is an option that is fraught with many
pitfalls for the average customer. Leasing regulation does not require as
much disclosure as buying a vehicle. This has given rise to many leasing
scams that trick the customer into believing they are into a good deal
when, in effect, all he is getting is a rough deal on the dealer's terms.
Here we look at some of these common scams and how to avoid them
Artificially low interest rates:
Some dealers quote a lower interest rate when in reality it's much
higher. They do this by either purposefully quoting the money factor as
the interest rate or calculating the loan without amortizing some closing
fees, like the security deposit, into the loan lease. Take the money
factor for example: this is typically expressed as a four decimal digit,
something like 0.004. Some dealers quote this as a 4% interest rate when
in fact you need to multiply it by 24 to get a rough idea of the interest
rate on your loan. In this example, the interest rate is a much higher 9.6%
than the quotedrate of 4%.
Make sure you crunch the numbers and understand the formula they use to
calculate their interest rate. Look out for any fees not factored into the
calculation. If you are not satisfied, do not enter into the lease
agreement.
Terminate your lease early for a low penalty
This is an all-time leasing scam. You ask your dealer how much you will pay
if you want to terminate your lease and he tells you: You want to get out
early? Sure thing, you only pay an early termination fee of $300. What he
is quoting is only the small administrative penalty of early termination,
there is a much stiffer penalty called early termination fee and this runs
into thousands of dollars.
Do not confuse the early termination administrative penalty with the
termination fee. Read the small print carefully and know exactly how much
you will get charged should you terminate your lease before its scheduled
end.
Pay for an extended warranty you don't need
This is another shell game to inflate the dealer's profit at your expense.
The dealer slides an extended-warranty into the deal whilst it's already
factored into the monthly payments, or he tricks you into buying a 36-month
warranty on a 24-month lease.
You do not have to pay extra money for a warranty already built into your
payments or for one that goes well beyond your lease term.
They might slip an extended warranty in. Don't be fooled, the warranty is
already factored in.
No security deposit
Any dealer who advertises a $0 security deposit is not telling you the
whole story. A security deposit is always factored in the lease under the
provision for disposition fees.
Latest news and information
 ABC News | Area auto dealers hope for rebound Traverse City Record Eagle, MI - "We're a fairly lease-intensive market, and Ford has stayed in the leasing business, so we've been able to pick up some market share from Chrysler and GM, ... Video: Chrysler, Toyota, Lead Declines in Auto Sales For Car Companies, It Was a Year to Forget Automakers weather sales declines for 2008 |
LeaseTrader.com's Auto Lease Transfer Marketplace Brought ... MSNBC - Like the housing market, no liquidity is a leading reason why the auto market suffered through one of its worst years for sales in recent memory. ... LeaseTrader.com's Auto Lease Transfer Marketplace Brought ... |
Auto sales plunge hits Kentucky, too Kentucky.com, KY - It has ended many leasing opportunities, too, which were also hurt by concerns about trade-in values. "That has probably cost our dealership 15 to 20 deals ... |
 National Post | Auto loan business in full gear: Experts Toronto Star, Canada - Banks have stepped up to provide car-loan business as the credit arms of some major car markers have stopped leasing vehicles and been forced to charge more ... Canadians prefer cars from Asia, Europe |
Research and Markets: Analyse the Auto Leasing, Loans & Sales ... MarketWatch - ... WIRE) -- Research and Markets ( http://www.researchandmarkets.com/research/7d1068/auto_leasing_loan) has announced the addition of the "Auto Leasing, ... Research and Markets: World Leasing Yearbook 2009 - Out Now |
 This is Money | Car leasing: Is it right for you? This is Money, UK - Car leasing can allow new car buyers to choose make and model and enjoy a new motor with less hassle and depreciation, but is it right for you? ... |
Brakes gave out on auto sector in '08; Big 3 seek to restructure USA Today - As auto sales swooned, carmakers began to move away from once-popular leasing, saying the residual value of returned cars was so low the practice was no ... |
 Telegraph.co.uk | Thousands of drivers who bought cars on hire purchase face ... Telegraph.co.uk, United Kingdom - The Finance and Leasing Association, the trade body representing finance houses which handle the business, admitted that thousands of drivers were returning ... Now spectre of negative equity stalks thousands of CAR owners |
 ABC News | GM's LaNeve Eyes Leasing,Aggressive Dealers,Sales CNNMoney.com - US auto sales dropped 37% in November to the lowest annual rate in 26 years. GM's sales fell 41% while Toyota Motor Corp. (TM) sales decreased 34% and ... GM sees boost from GMAC bailout, easier credit GM offers 0-percent financing to boost sales GM Aims To Drive Sales With Incentives |
Drivers resisting allure of new cars Toronto Star, Canada - "You're not going to work up bills around $3600 on a three-year-old car, but you will by leasing a brand-new car." Meanwhile, a high number of used cars are ... |
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